Answer the Following Questions Using the Information Below

question 144

Multiple Choice

Answer the following questions using the information below:
LaCrosse Products has a budget of $900,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,000 in variable costs. The new method will require $40,000 in training costs and $100,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units.
Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54 per failed unit. The company's average external failures average 3% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories.
-How much will internal failure costs change if the internal product failures are reduced by 1/3 with the new procedures?

• A) $22,500 decrease
• B) $67,500 decrease
• C) $500,000 decrease
• D) $750,000 decrease

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Definitions:

Atomic Mass

The mass of an atom, typically expressed in atomic mass units (amu), representing the total number of protons and neutrons in the nucleus.

Covalent Bonds

A chemical bond formed by the sharing of one or more pairs of electrons between atoms.

Phosphorus

A chemical element with the symbol P and atomic number 15, essential to all living cells and used in the manufacture of fertilizers.

Oxygen

A chemical element with symbol O, essential for cellular respiration in most aerobic organisms.